DA NANG UNIVERSITY OF ECONOMICS
FACULTY OF INTERNATIONAL BUSINESS
SPECIAL TOPIC
RESEARCH THE FOREIGN DIRECT INVESTMENT OF SOUTH KOREA
TO VIETNAM IN RECENT YEARS
Ồ
Ị
STUDENT: H TH VUI
CLASS: 42K01.5
Ấ
Ễ
`
LECTURER: NGUY N ANH TU N
DA NANG 2019
Contents
2
3
LIST OF TABLES
RESEARCH THE FOREIGN DIRECT INVESTMENT OF SOUTH KOREA
TO VIETNAM IN RECENT YEARS
INTRODUCTION
Necessity of the topic
Foreign direct investment is now taking place on a global scale with increasing
volume and pace of rotation. In addition to promoting domestic resources, taking
advantage of foreign direct investment is considered as a smart to shorten the time of
initial capital accumulation, creating a solid premise for economic development,
especially for developing countries. Therefore, FDI is considered as the "golden key"
to open the door of prosperity for nations. In recent years, the number of countries
investing in Vietnam has been increasing, especially Korea. This in addition to
creating favorable conditions for the country's development such as creating jobs for
workers, increasing investment capital for facilities ... also causes many disadvantages
and damages to the economy in the long term. Therefore, the purpose of the study is
to find out the impact foreign direct investment into Vietnam.
Research objectives:
To research the Korean direct investment activities in Vietnam in the recent years
Research tasks:
Firstly, clarify and deepen the importance of FDI in Vietnam.
Secondly, clearly state the status and impact of Korea's FDI in Vietnam.
Thirdly, propose some solutions to effectively use FDI capital and attract foreign
capital.
Research object:
The situation of Korean FDI inflows into Vietnam.
4
Space: from the perspective of the state
Time: study with data series from 20102018
Research Methods :
Methods of data collection: journals, statistics, surveys, ..
Statistical methods, statistical analysis
Topic structure:
In addition to the preamble, table of contents, list of references, there are also the
following chapters:
CHAPTER 1: OVERVIEW
CHAPTER 2: OVERVIEW OF THE FOREIGN DIRECT INVESTMENT FLOWS
INTO VIETNAM
CHAPTER 3: SITUATION OF SOUTH KOREAN FOREIGN DIRECT
INVESTMENT INTO VIETNAM
5
CHAPTER 4: PROPOSALS TO ATTRACT MORE FDI CAPPITAL TO VIETNAM
CHAPTER I OVERVIEW ABOUT FDI
Definition :
The World Trade Organization gives the following definition of FDI:
Foreign direct investment (FDI) occurs when an investor from one country (the host
country) acquires an asset in another country (the country that attracts the investment)
along with the right to manage that asset. The management aspect is what
distinguishes FDI from other financial instruments. In most cases, both the investor
and the property he or she manages overseas are business entities. In such cases, the
investor is often referred to as a "parent company" and the assets are called
"subsidiaries" or "branch companies".
=>Foreign direct investment is a form of longterm investment by an individual or
company of one country in another country by establishing a business or production
establishment. The foreign individual or company will take control of this business.
Forms of FDI
Classified by investment nature
Investment in operating facilities
Operating facilities investment is a form of FDI in which the parent company invests
in procurement and establishes new business facilities in the host country. This form
increases the volume of investment.
Merger and acquisition
Mergers and acquisitions are forms of FDI in which two or more FDI enterprises are
merging with one another or one of these enterprises (either operating in the host
country or abroad) acquires one FDI enterprises in the host country. This form does
not necessarily lead to an increase in the volume of investment.
Classified by the nature of capital flows
Stock capital
Foreign investors may purchase shares or corporate bonds issued by a domestic
company at a level large enough to have the right to participate in the company's
management decisions.
Reinvestment capital
FDI enterprises can use profits earned from past business activities to make additional
investments.
Internal debt transactions
Between branches or subsidiaries in the same multinational company may lend to
each other to invest or buy shares, corporate bonds of each other.
Divided by the motive of the investor
Capital to search resources
These are capital flows aimed at exploiting cheap and abundant natural resources in
the host country, exploiting labor resources that may be low in skills but low in price
or exploiting abundant skilled labor resources. This type of capital also aims to exploit
brandname assets in receiving countries (such as famous tourist destinations). It also
aims to exploit the intellectual property of the receiving country. In addition, this form
of capital also aims to scramble for strategic resources to avoid falling into the hands
of competitors.
Capital to search efficiency
This is a source of capital to take advantage of low input costs in receiving countries
such as cheap raw material prices, cheap labor costs, prices of production factors such
as electricity, water, communication costs, transportation, cheap business premises,
preferential tax rates, legal conditions, etc.
Capital to search the market
This is a form of investment to expand the market or keep the market from being lost
by competitors. In addition, this form of investment also aims to take advantage of
economic cooperation agreements between host countries with other countries and
regions, taking the receiving countries as a springboard to penetrate into regional and
global markets. .
Factors promoting foreign direct investment
Differences in marginal productivity of capital among countries
The marginal difference in productivity (the number of extra outputs a manufacturer
can produce as a result of an additional unit of production factor) of capital between
countries. An excess country often has lower marginal productivity. A country that
lacks capital often has higher marginal productivity. This situation will lead to the
movement of capital flows from the surplus to scarce places to maximize profits.
Because the production costs of surplus countries are often higher than those of capital
shortage countries. However, this does not mean that all activities with high marginal
productivity are invested in production by enterprises but also important activities,
which are vital for enterprises to produce whether that activity gives low marginal
productivity.
Product cycle
For most businesses involved in international business, the life cycle of these products
consists of three main stages: the new product stage; maturity of products;
standardized product stage
Special advantages of multinational companies
Multinational companies have unique advantages (such as basic competencies) that
allow them to overcome cost constraints abroad so they are willing to invest directly
abroad. When choosing investment locations, multinational companies will choose
where the conditions (labor, land, politics) allow them to exert the aforementioned
specific advantages. Multinational companies often have a great advantage of capital
and technology investing in countries that have available raw materials, cheap labor
costs and often a potential consumer market ... We easily realize the benefits of this.
Market access and reduced trade conflict
Foreign direct investment is a measure to avoid bilateral trade conflicts. For example,
Japan is often complained by the United States and Western European countries
because Japan has a trade surplus and other countries have trade deficits in bilateral
relations. In response, Japan has increased its direct investment in those markets. They
manufacture and sell cars and computers in the United States and Europe, to reduce
exports of these products from Japan. They also invest directly in third countries, and
from there export to North American and European markets.
Exploiting experts and technology
It is not that FDI only goes from the more developed to the less developed. The
opposite is even stronger. Japan is a country actively investing in the US to exploit a
team of experts in the US. For example, Japanese car companies have opened car
design departments in the US to employ American experts. The same goes for
Japanese computer companies. Not only does Japan invest in the United States, other
industrialized countries have similar policies
Access to natural resources
For raw materials, many multinational companies seek to invest in countries with
abundant resources. Japan's first major wave of foreign direct investment in the 1950s
was for this purpose.
Benefits of attracting FDI
Supplement to domestic capital
In theories about economic growth, the capital factor is always mentioned. When an
economy wants to grow faster, it needs more capital. If domestic capital is not enough,
the economy will want both foreign capital, including FDI.
Acquire technology and management knowhow
In some cases, capital for growth despite lacking can still be mobilized partly by
"austerity policy". However, technology and management knowhow cannot be
achieved by that policy. Attracting FDI from multinational companies will provide a
country with the opportunity to acquire technology and business management know
how that these companies have accumulated and developed over the years and with
great expenses. However, the dissemination of these technologies and management
knowhow to the whole country to attract investment also depends heavily on the
country's absorbing capacity.
Join the global production network
When attracting FDI from multinational companies, not only enterprises with
investment capital from multinational companies, but even other domestic enterprises
having business relations with such enterprises will also participate too. regional labor
division process. Therefore, the country attracting investment will have the
opportunity to join the global production network to facilitate exports.
Increase the number of jobs and labor training
Because one of the purposes of FDI is to exploit the conditions to achieve low
production costs, foreigninvested enterprises will employ many local workers. An
increase in the income of a part of the local population will contribute positively to
local economic growth. In the process of hiring, training of occupational skills, which
in many cases is new and progressive in developing countries that attract FDI, will be
provided by enterprises. This creates a skilled labor force for the country to attract
FDI. Not only ordinary workers, but also local professionals also have the opportunity
to work and be fostered professionally in foreigninvested enterprises.
Large budget revenue
For many developing countries, or for many localities, taxes paid by foreigninvested
enterprises are an important source of budget revenue.
CHAPTER I OVERVIEW OF FOREIGN DIRECT INVESTMENT
FLOWS INTO VIETNAM
If Vietnam wants to achieve its goals of industrialization and modernization
(industrialization and modernization), the most important issue is to mobilize and use
foreign direct investment effectively. In recent years, the Government of Vietnam has
always attached great importance to attracting investment from abroad. The
Government continuously improves the investment environment, facilitating domestic
and foreign enterprises, in which attaching special importance to the implementation
of the lawmaking program.
Scale of FDI investment in Vietnam
According to data of Foreign Investment Agency, from 1988 to October 20, 2017, 63
provinces and cities of our country have received 24,397 FDI projects of 128 countries
and territories, with registered capital (there are also effectiveness) 312.9 billion USD,
realized capital is 169.05 billion USD.
From 1991 to now, realized FDI has increased rapidly:
1991 2000 reached 19,462 billion USD, an average of 1.95 billion USD / year.
2001 2010 reaching 58,497 billion USD, equaling 3 times the previous decade; on
average 5.85 billion USD / year.
2011 2016 reached 84 billion USD, equaling 4.55 times in the period of 1991
2000 and 1.43 times 10 years earlier; on average 12 billion USD / year.
In 2016, the foreign invested economic sector contributed about 19% of domestic
revenue and 19% of GDP; accounting for over 50% of industrial output value, in
which oil and gas, electronics, smartphones, mobiphone, electronic components,
animal feed, drinks,... Have a much higher proportion; accounting for nearly 72% of
total export turnover of which the main product is manufactured goods with high
added value, trade surplus of about 25% of export turnover of this sector, not only to
offset the trade deficit of enterprises in countries but also created a trade surplus of
nearly 3 billion USD.
Foreign direct investment projects licensed in period 1988 2018 by Year and Items
Number of Total registered capital Implementation capital
2010 2011 2012 2013 2014 2015 2016 2017 Prel. 2018 projects 1237 1186 1287 1530 1843 2120 2613 2741 3147 (Mill. USD) 19886.8 15598.1 16348 22352.2 21921.7 24115 26890.5 37100.6 36368.6 (Mill. USD) 11000.3 11000.1 10046.6 11500 12500 14500 15800 17500 19100
Table Vietnam’s foreign direct investment projects in period 2010 2018
(General statistics office of Vietnam)
Investment structure by industry
Sectors that attract foreign direct investment in Vietnam include agriculture,
manufacturing, real estate, ... The sectors which have been expanded and diversified
over time.
Foreign direct investment projects licensed by kinds of economic activity (Accumulation
of projects having effect as of 31/12/2018) by Kinds of economic activity and Items
Number of Total registered capital
projects 27454 491 108 13306 (Mill. USD) 340849.9 3455.7 4903.8 195911.4
TOTAL Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, stream and air conditioning
119 23092.8
supply Water supply, sewerage, waste management and
remediation activities Construction Accommodation and food service activities Information and communication Education and training Human health and social work activities Other service activities 70 1593 734 1884 458 142 142 2658.7 10091.1 12025.6 3603.6 4340.9 1970.9 78078
Table FDI projects licensed by kinds of economic activity (General statistics office
of Vietnam)
Investment structure by economic region
Foreign investment capital invested in Vietnam is unevenly distributed among
provinces. The investment is concentrated in big cities such as Ho Chi Minh City,
Hanoi, Da Nang and provinces with developed economies. This increases the local
budget, concentrates labor resources, creates jobs, and increases income for people.
Foreign direct investment projects licensed in 2018 by province by Cities, provincies and
Items Number of Total registered capital (Mill.
projects 3147 1155 640 116 USD) 36368.6 14833.5 7547.8 3135.4
WHOLE COUNTRY Red River Delta Ha Noi Hai Phong Northern midlands and mountain
102 1423.1
areas North Central area and Central
coastal area Da Nang Quang Nam South East Binh Duong Dong Nai Ba Ria Vung Tau Ho Chi Minh City Mekong River Delta 16 30 15 29 130 48 1060 140 92 364.7 479.8 375.4 487 1481.1 2299.9 6237.6 2588.1 707.7
Table FDI projects licensed in 2018 by cities, provinces and items (General
statistics office of Vietnam)
Investment structure by investment partners.
The source of investment capital from countries to Vietnam is more and more
plentiful to the investing countries. Investment countries are mainly developed or
developing strongly in the international market and have close relationship with
Vietnam. Previously, Japan was the country with the largest investment capital in
Vietnam, including ODA and FDI. However, in the past decade, South Korea started
to rise and ranked first in terms of total FDI inflows into Vietnam.
Foreign direct investment projects licensed in 2018 by main counterparts by Main counterparts
and Items
Japan Number of projects 440 Total registered capital (Mill. USD) 8944.5
Korea Rep. of Singapore Hong Kong SAR (China) China. PR British Virgin Islands Australia France United States 1071 228 174 408 42 43 40 88 7320.5 5249.9 3252.6 2531.7 1885 609.1 590.1 555.4
Table FDI projects licensed in 2018 by main counters (General statistics office of
Vietnam)
CHAPTER II SITUATION OF KOREAN DIRECT INVESTMENT IN
VIETNAM
Overview of Korean FDI
Korea has investment projects in all regions of the world with projects in 185
countries and territories. In particular, focusing on China countries (total registered
capital reached 83.3 billion USD including Hong Kong), United States (76.5 billion
USD), Vietnam, Australia, Netherlands, Canada, Indonesia, ...
Regarding investment, Korea invested mainly in manufacturing industry (USD 122
billion of registered capital); mining (85 billion USD); finance and insurance (US $ 41
billion); wholesale and retail (33.7 billion USD); real estate business (26.3 billion
USD); professional, scientific and technical services (20.4 billion USD); construction
(9.9 billion USD); IT (7.1 billion USD); transportation (5.5 billion USD),
accommodation and catering services (5 billion USD), ...
Table : Korea's FDI capital flows into the nations
Economic relationship between Vietnam and Korea
Vietnam and Korea are two Asian countries. The two countries established diplomatic
relations on December 22, 1992. Over the past years, Korea has always ranked in the
top 5 countries with the largest economic relations with Vietnam. The two countries
have set up a KoreaVietnam Intergovernmental Committee on Economic, Scientific
and Technical Cooperation to promote bilateral economic cooperation. The two sides
signed a number of important agreements such as: Agreement on economic and
scientific cooperation (February, 1993), Agreement on encouragement and protection
of amended investment (September 2003),… In addition, in the past 10 years, South
Korea assessed that Vietnam had basically built a cluster infrastructure to develop a
number of industries along the product chain such as electricity, electronics, textiles ...
Especially when the two countries signed a bilateral trade agreement in May 2015,
the implementation of this agreement will surely lead to more quality and deeper trade
and investment cooperation. For example, Vietnam's commitments on investment
services and activities to Korean companies under VKFTA. In addition, Korea and
ASEAN also signed the first commitment package of the ASEANKorea Free Trade
Agreement
Korea's invested enterprises mainly focus on manufacturing industry, employing a lot
of labor and the main exported products. Taking advantage of cheap labor is still the
goal of many foreign investors when investing in Vietnam. Korea's FDI capital flows
into automobile, motorbike, electronics, civil and export products.
South Korean investors invest in Vietnam mainly in the form of 100% foreign
invested capital accounting for about 80%, followed by jointventure enterprises
accounting for about 15% and the remaining is contractual contracts business
cooperation,...It is possible that Korean investors are very careful when investing in
partners, and they are very careful in choosing business forms, fields of investment,
and locations.
Scale of Korea FDI investment in Vietnam
Korean investment projects generally perform well, with large average capital scale, higher than the national average (over 40 million USD) and mainly focusing on
material production. Korean investment projects mainly focus on areas with relatively good infrastructure. The proportion of dissolved projects in Korea is relatively low (about 10%), because Korean investors are very careful in conducting surveys and research before deciding to minimize risks before went into operation.
According to GSouth Korea is currently the largest foreign investor in terms of both
the number of projects and the total investment capital out of the 112 countries and
territories investing in Vietnam. Accumulated to October 2016, the total registered
investment capital of Korea from Vietnam reached over 50 billion USD with 5,593
valid investment projects. Korean FDI enterprises play an important role in Vietnam's
economy by creating jobs for 70,000 workers and contributing about 30% of the total
export value of Vietnam. Korean businesses are doing business methodically in
Vietnam and are considered as serious, highly effective investors and also have many
contributions to Vietnam.
For example, Korea was the country with the most direct investment in Vietnam in
2015, accounting for 24% of the total investment capital in 2015 with various large
and small projects across most localities in the country. Next is Japan, Taiwan,
Singapore,...which are also countries that are expected to have large FDI inflows into
Vietnam in the following years.
Table Total register investment capital 2015 (General statistics office of Vietnam)
As of November 2015, total Korean FDI accounted for 31.6% of total FDI into
Vietnam. If counting the project of Hyosung Group (US $ 660 million, invested
through Turkish entity), Korean FDI accounts for 34.9% of total FDI in Vietnam, 4.1
times higher than Japan; 6.2 times Taiwan and 6.8 times Singapore (but the traditional
FDI partner ranks 2.3.4 of Vietnam).
Structure of Korean direct investment capital into Vietnam
Investment structure by investment sector
Table Korea's FDI structure by sectors into Vietnam 2015 (General statistics office of
Vietnam)
According to Vietnam’s Foreign investment agency, in 2015, Korean projects were
implemented on 18/21 branches and fields; the leading industry is manufacturing and
processing with 2,566 projects with a total registered capital of US $ 24.03 billion
(accounting for 64.5% of total investment capital). Real estate business ranked second
with 82 projects with a total capital of US $ 6.99 billion (accounting for 18.5% of total
investment capital). Construction field ranked third with 579 projects, total investment
capital of US $ 2.4 billion (accounting for 6.4% of total investment capital)...
Among Korean investment projects, there are a number of large projects, focusing on
efficient industry, contributing positively to socioeconomic stability and development
of colonized localities. In the automobile manufacturing industry, there is Vietnam
Daewoo Automobile Company in Hanoi, registered capital of US $ 32.2 million, legal
capital of US $ 10 million, which is 100% owned by Daewoo since year. 1996,
effective, export products, Daewoo cars market share in Vietnam accounted for 15%;
The company has been profitable since 2000. In recent years, Koreaninvested
enterprises have performed relatively well, although unavoidably difficult due to the
fierce competition and Vietnam. Currently committed to cutting taxes within the
framework of AKFTA. In addition, local raw materials and spare parts are not
sufficient. Supporting industries have not been fully developed, so most of the raw
materials and spare parts have to be imported; input costs are still high, the quota
regime on EU and US markets has limited the production capacity of garment
projects, mostly Korean projects ... affecting the performance. The impact of Korean
FDI projects in Vietnam. On the other hand, there are labor disputes in some
enterprises with 100% Korean capital which mostly stem from conflicts of economic
interests between the parties and working conditions. In general, all cases are handled
satisfactorily on the basis of conciliation, negotiation and mutual concessions with the
participation of representatives of local competent agencies and agencies.
Investment structure by region
Table Structure of FDI by locality of Korea into Vietnam 2015 (General statistics
office of Vietnam)
In 2015, Korea invested in 51/63 cities and provinces nationwide. In which, Hanoi
attracted the most investment capital from Korea with 885 projects with a total
registered capital of 5.3 billion USD, accounting for 14% of total investment capital,
followed by Thai Nguyen with 43 projects. With total investment capital of 4.72
billion USD, accounting for 12.5% of total investment capital, Dong Nai ranks 3rd
with a total investment of 4.56 billion USD (accounting for 12.1% of total investment
capital). The rest are other localities.
Results from Korean direct investment in Vietnam
South Korea has become an important economic partner of Vietnam
After establishing official diplomatic relations at the end of December 1992, the
economic relations between the two countries had much development. Right from the
first years of promulgating the Law on Foreign Investment of Korean investors was
present in Vietnam. As of now, Korea is the first country among 105 countries and
territories investing in Vietnam with 4,777 valid projects with a total registered
investment capital of nearly 4.36 billion USD. Investment of Korean enterprises is
mainly concentrated in big cities, with relatively good infrastructure conditions such
as Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong and concentrated mainly in the
industries such as auto assembly, steel, mechanics, electronics, footwear, textiles and
construction
Most large Korean corporations have been present in Vietnam to create jobs for
workers
Many projects with large investment scale (over 40 million USD) such as Hyundai
Shipyard Vinashin with total investment of 192.6 million USD; Samsung Factory
Vina Synthetics produces fabrics, polyester yarn with total investment of 192.6
million USD; Orion Hanel shaped lamp company with total investment of 178.5
million USD; Deaha Company Limited with total investment of 52 million USD to
build 5 star hotel; VSC POSCO steel production project with a total investment of
56.1 million USD,... has contributed positively to the socioeconomic development of
Vietnam.
Korean FDI enterprises play an important role in Vietnam's economy by creating jobs
for about 70,000 laborers and contributing about 30% of Vietnam's total export value
in 2014.
Some large projects of over US $ 1 billion in Vietnam in Vietnam
Sam Sung Thai Nguyen HighTech Complex Project Phase 2 investors Sam Sung
Electronics Vietnam Co., Ltd. Thai Nguyen Korea, the investment project in Yen
Binh I Industrial Park, Thai Nguyen Province with total investment capital registered
capital of 3 billion USD;
Project of LG electronics Vietnam Hai Phong Co., Ltd., investor of LG Electronics
INC, this project invested in Hai Phong Industrial Zone, Hai Phong province with
total registered investment capital of 1.5 billion USD;
Samsung Electromechanics Vietnam Co., Ltd., the investor of Samsung Electro
mechanics Co., Ltd, the project is invested in Yen Binh I Industrial Park, Thai Nguyen
Province with a total registered capital of 1.23 billion USD;
Project of PoscoVietnam Co., Ltd., investor of Posco Co., Ltd, Korea, the project is
invested in My Phu II Industrial Park, Ba Ria Vung Tau Province with a total
registered investment capital of 1.128 billion USD. ;
Project of SamSung Display Bac Ninh Co., Ltd, investor of Sam Sung Display Co.,
Ltd, the project is invested in Yen Phong I Industrial Park, Bac Ninh province with a
total registered capital of 1 billion USD;
The Impact of Korea’s FDI on the Vietnamese Economy
Achievement
After more than 10 years of establishing diplomatic relations, relations between the
two countries are increasingly developing. Twoway trade turnover always achieved a
stable growth of 1015% / 1 year. In addition to the policy developments, the
Vietnamese economy provided a developed infrastructure in designated areas. Further
improvements in the Vietnamese economy, such as the accession to the ASEAN and
WTO, stimulated not only Korea’s OFDI but also investments from many other
countries, mostly in Asia. Consequently, Korea’s FDI in Vietnam has grown
extensively over the years, influencing the Vietnamese economy through various
channels, like economic growth, employment generation and the transfer of
technologies estimation results showed that FDI had a positive effect on labor
productivity and economic growth in Vietnam. Data for Vietnam’s provinces showed
that FDI, together with domestic investment, human capital, labor force and
international trade, had positive effects on economic growth. That brings a huge
revenue to the country, paving the way for other countries to continue investing in
Vietnam. Creating capital for our country to invest in developing facilities, industrial
parks and factories built to create jobs for laborers. Take advantage of the country's
strengths and develop its economy.
Limitations
There is no denying the benefits that Korea's FDi capital has brought to Vietnam in
recent years. However, besides the quiz, there are still some aspects that adversely
affect our country.
First, allowing Korean businesses to rush to build factories. factories across the
country caused mixed reactions from the people. Factories occupy land, causing harm
to longterm living environment, failing to build up standards, thus causing harms to
workers' health and labor safety.
Secondly, the industries that Korea invests in our country are only secondary
industries, which need low labor skills, so enterprises pay low salaries, making
products with no high value for the economy, causing waste. social resources,
disequilibrium among sectors in the economy.
And, businesses are mainly invested with 100% foreign capital, so we have difficulty
controlling, limited technology transfer, not helping longterm development.
CHAPTER III Proposals to attract more FDI capital into Vietnam
Experiences from other countries
China
China has mobilized FDI in the form of production contracts, joint ventures, 100%
foreign investment capital into special areas. The basic policy to attract Chinese
investment is the tax policy. China has issued many separate taxes for investment
forms: joint venture, 100% foreign capital for 14 coastal cities. The joint venture pays
taxes with 30% and 10% additional income for the localities. For enterprises with
100% foreign capital, the profit tax is from 2040% and 10% for localities.
Regarding import and export duties, China has exempted import taxes on items such
as: machinery, equipment, loose parts, materials contributed as joint venture capital,
or machinery and equipment from foreign countries. brought in to exploit oil and gas,
develop energy, railways, roads, and put into export processing zones.
Regarding administrative procedures, China decentralizes strongly to localities on
project evaluation and investment licensing. After obtaining the investment license,
the procedures related to project implementation were quickly resolved.
The ground clearance, electricity supply, water supply, traffic and environment issues
have been completely solved. Implementing the "onedoor" policy to create favorable
conditions for FDI attraction. In addition, China for a longer period may be more than
50 years.
Indonesia
Indonesia encourages investment in export projects, saving foreign currencies,
processing finished and semifinished products, transferring technology, employing
experts and Indonesian labor.
(cid:0) About tax policy:
For profit taxes, if the company has a net profit of 10 million rupees or less, it is taxed
at 15%, over 10 million rupees, it is taxed at 25%, over 50 million rupees, the tax is
35%. Interest, rental, resource, technical, and management fees are taxed at 15% on
sales. There is no sales and income tax reduction.
(cid:0) Regarding import tax:
Indonesia has an import duty exemption or reduction policy on machinery, equipment
and parts approved by the investment committee in the list.
For export products: The credit interest rate for export is 9% / year, while other
interest rates are 1824% / 1 year. Refunded or exempted from import tax on items.
The company that produces the goods for export is not only allowed to export its
goods but also other companies.
(cid:0) Regarding market policy:
Recently, in order to create a favorable competitive environment, Indonesia allowed
all industries except the exclusion list and in bonded warehouses to be free in the
domestic market. Indonesia also lifted restrictions and taxes on the use of foreigners.
(cid:0) Regarding administrative procedures:
Indonesia simplifies procedures for granting investment licenses, especially industrial
investment.
Thailand
The Thai government encourages investors to cooperate with state agencies, exploit
resources and protect the environment, laborintensive projects, labor export, and use
Thai raw materials, replacing imported goods, is prioritized by the state.
The rate of joint venture capital does not become a mandatory condition. However, for
projects that allow Thailand to contribute more than 50% of capital, the investment
committee issues guarantee certificates.
In terms of profit tax, a 30% tax on companies and partners registered on the stock
market in Thailand and a 35% tax on companies and other partners. Depending on
each project, income tax may be exempted or reduced for 38 years after it is
profitable. Regarding import tax, enterprises are exempted from 50% of import tax on
goods that Thailand cannot produce.
Regarding export, enterprises producing export products are exempted from import
tax on materials, spare parts, details temporarily imported for reexport, and exempt or
reduced income tax by 5%. Enterprises in export processing zones are exempt from
import tax on supplies.
Solutions to improve the efficiency of attracting and using foreign investment
capital in the coming time
In the coming time, with the context of the strong 4.0 Industrial Revolution, the
orientation to attract FDI in line with the requirements of Vietnam's international
economic integration, it is necessary to focus on the following issues:
Firstly, to prioritize attracting FDI capital into hitech industries, new and advanced
technologies, environmentfriendly technologies, information technology,
telecommunications and electronics, at advanced levels of world, automotive
technology, agricultural machinery, construction equipment, industrial equipment,
electrical equipment, supporting industries, research and development, financial
services, logistics and other modern services. ...
Secondly, identifying FDI attraction is both an opportunity and a challenge, thereby
building a mutually beneficial, cooperative relationship. In order to increase the added
value per unit of product and increase the "localization" rate, foreign investors should
be invested in capital, high technology, advanced and modern, to participate more
deeply. production networks and global value chains; Contribute to improving the
capacity of innovation, national competitiveness, businesses and products and services
of Vietnam. At the same time, it is necessary to strengthen the linkage between the
FDI sector and the domestic sector to increase the "localization" rate and the value of
the products created. Thereby, expanding exports, promoting economic restructuring,
associating with innovation of growth model on the basis of Industrial Revolution 4.0.
Thirdly, there is a strategy to train managers and technical workers working in FDI
enterprises in terms of professional skills, behavior and working attitude. Hone the
managerial staff operating in the field of foreign economic skills of market
exploitation, business skills and international law ... Paying attention to salary
policies, building trade unions in FDI enterprises to protect the legal rights for
Vietnamese workers.
Fourthly, continue to improve the system of laws and policies related to investment in
the direction of publicity and transparency, ensuring competitiveness compared to
other countries in the region. Ensure clarity, detail, ease of application and
transparency of procedures to improve the investment environment. At the same time,
perfecting legal documents to encourage and create favorable conditions for
technology transfer activities, ensuring the effectiveness of state management of this
activity, preventing the situation of "price transfer" ”, Evading taxes, evading financial
obligations through technology transfer contracts.
Conclusion
After more than 20 years of implementing the economic reform policy, opening up
foreign investment attraction, international economic integration box in the region and
the world, especially after joining the World Trade Organization, Vietnam has made
great achievements in national construction and development. From a poor, backward
country, we have gradually established a solid foundation in the near future to gain a
foothold in the international arena.
With the goal of turning our country into an industrialized country by 2020, the
government needs solutions to attract foreign investment, effectively utilize capital,
protect the environment and ensure growth in longterm. Invest properly, catch up the
trend of social development, should not follow the path, and go after other countries.
Maintain good relationships with countries around the world, taking human
development as the core for the country's development. Eliminate projects and plots
harming the nation, people and the natural environment.
References
1. The Impact of Foreign Direct Investment on Economic Growth: Evidence from
Vietnam
2. The Patterns of Korea’s Foreign Direct Investment in Vietnam Ji Hyun Oh, Jai S.
Mah
3. Potential economic impacts of the VietnamKorea free trade agreement on Vietnam
Thanh Hoan Phan Assistant Professor, College of Economics, Hue University, Ji
Young Jeong Professor, College of Commerce, Chonbuk National University
4. Improving quality of foreign direct investment attraction in Vietnam Ngo Phuc
Hanh, Đao Van Hùng, Nguyen Thac Hoat & Dao Thi Thu Trang
5. General statistics office of Vietnam
6. Vietnam’s Ministry of planning and investment.
